The Core Value of Business Planning - Part 7 of 8

Developing a business plan can give you huge benefit, says Tim Berry, but the process of planning is what really matters. Following up, comparing your plan versus actual, and measuring results and correcting where needed is all part of making the most of the planning process. Duration: 4:31

Transcript

So we look now at the real core of the value of business planning as a process within a business or an organization. It's not just what you get from developing the plan. It's what you get from implementing the plan and making that plan a management tool that not only gets you over that hurdle of money or investment or whatever, but becomes a way to manage your company better and actually achieve that future that you've imagined.

And perhaps the most important factor in achieving that result and turning your plan into a management tool is regularly reviewing the plan. Don't let it be a plan that gets done and goes into a drawer. Sure, it might help you with the loan. It might even help you with the investment, but the real value in plans is the process of reviewing the plan and using it to generate better management, constant course correction. So we look here at what was our sales forecast for this restaurant. And now let's look at what the actual sales were and we'll compare plan versus actual with the variance or plan versus actual.

Take a look at the example here. We actually sold 812 meals, but we planned to sell 779, so we sold 33 meals more than our plan. And on drinks, we only sold 279, but we had planned to sell 390. So the difference or variance is negative 111. We sold 111 fewer drinks than what we had planned. This kind of analysis then leads us to better management. Take a look at what's going on in your business and focus then with real human subjective management on the difference. Meals as it turned out cost on average $4 more than what we thought we would price them. So we actually have more in sales for meals than what we planned even though we sold fewer.

That's an interesting result, and there may be management involved in that. With drinks, we sold a lot fewer than we planned but for a little bit more than planned, so we actually had only a $96 difference. And on the other things, we sold a lot more than planned but for less money than planned. We still have a positive there of $302 more than planned, and in the end, our sales were each month greater than what our plan was.

These are just numbers unless you use them as a regular review, a way to turn a plan into a planning process and make your business better. Plans can be a huge benefit in your business. Developing a business plan can give you huge benefit. We talked about getting the loan, getting the investment, or simply determining your own future, but let's think now beyond the plan about the process because that can be so much more important.

We start with the plan itself and you can measure a plan as it sits there as a development plan. How good is it in terms of how realistic is it, how specific is it, how simple is it. These are important factors in a plan, but what really matters then is do you follow up? Do you review the plan? Do you see plan versus actual? Do you check with your team, with your managers, or just with yourself to make sure that you're doing what you planned to do. And then you deal with the doing part.

Are you actually doing it? Aside from managing follow-up, are you getting the things done that you expected and planned to get done, which leads to results. Is the world responding? Are customers responding? Are vendors responding? Are things happening as you expected as part of this plan? And then with review, you go back and correct your plan, create new plans, use this whole process as a management tool to make sure that you are proactively determining your business's own future.

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Developing a business plan can give you huge benefit, says Tim Berry, but the process of planning is what really matters. Following up, comparing your plan versus actual, and measuring results and correcting where needed is all part of making the most of the planning process.